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Economics Summary by Tejvan Pettinger on January 17, 2012 in economics
Economics is concerned with the optimal distribution of scarce resources within society. For example, economics is concerned with how individual decisions like how firms produce goods and which goods people buy. An important element in economics is concerned with the extent to which governments can intervene in the economy to improve economic welfare. Economics is also concerned with wider issues such as economic growth and unemployment – issues that affect the whole of society.
Supply and Demand
The most basic model in economics concerns how the price and quantity of goods and services is determined. For example, if demand for a good rose, we observe that this usually leads to a higher price. This higher price in turn encourages firms to supply more. This simple model helps explain a whole variety of different issues and topics. For example, we can use supply and demand to explain wage differentials. A lawyer can command a high wage because the number of qualified lawyers is very low. Cleaners tend to get lower wages because there are many more people with necessary qualifications.
Behaviour
Economics is concerned with decisions that agents (firms and consumers) make. For example, classical economics generally assumes that people wish to maximise their well-being; i.e. we assume firms wish to maximise profits and consumers wish to maximise their utility (happiness)
However, the real world is more complicated. Not all firms wish to maximise profits; they may seek to maximise market share or pursue other social / environmental objectives. Also people may not be rational but get caught up in irrational booms and busts (e.g. stock market booms, housing booms, dot com bubbles). Therefore there is a branch of economics known as behavioural economics.
Macro Economics
Macro economics is a term relating to nation wide economic problems. For example, the rate of inflation in a country
Economics is concerned with the optimal distribution of scarce resources within society. For example, economics is concerned with how individual decisions like how firms produce goods and which goods people buy. An important element in economics is concerned with the extent to which governments can intervene in the economy to improve economic welfare. Economics is also concerned with wider issues such as economic growth and unemployment – issues that affect the whole of society.
Supply and Demand
The most basic model in economics concerns how the price and quantity of goods and services is determined. For example, if demand for a good rose, we observe that this usually leads to a higher price. This higher price in turn encourages firms to supply more. This simple model helps explain a whole variety of different issues and topics. For example, we can use supply and demand to explain wage differentials. A lawyer can command a high wage because the number of qualified lawyers is very low. Cleaners tend to get lower wages because there are many more people with necessary qualifications.
Behaviour
Economics is concerned with decisions that agents (firms and consumers) make. For example, classical economics generally assumes that people wish to maximise their well-being; i.e. we assume firms wish to maximise profits and consumers wish to maximise their utility (happiness)
However, the real world is more complicated. Not all firms wish to maximise profits; they may seek to maximise market share or pursue other social / environmental objectives. Also people may not be rational but get caught up in irrational booms and busts (e.g. stock market booms, housing booms, dot com bubbles). Therefore there is a branch of economics known as behavioural economics.
Macro Economics
Macro economics is a term relating to nation wide economic problems. For example, the rate of inflation in a country